July 27, 2020 / 3:11 PM / in 17 days

UPDATE 1-Poland plans cuts in coal mining as coronavirus crisis hits demand

(Adds details, background)

By Agnieszka Barteczko

WARSAW, July 27 (Reuters) - Poland's biggest coal producer, state-run PGG, plans to restructure mines and temporarily cut miners' salaries as part of a rescue plan designed to help the company survive the coronavirus crisis, the state assets ministry said on Monday.

PGG has been hit by falling demand for coal, lower prices, and by the rising number of coronavirus infections, which led to the temporary closure of some mines in June.

Also, Poland can no longer ignore the European Union's drive to cut carbon emissions, which has made coal-based power generation expensive.

The restructuring plan will be presented to trade unions on Tuesday. The ministry has not provided details of the plan.

On Sunday industry sources told Reuters that the government would announce deep cuts in coal output and the closure of a number of mines.

One source said PGG's annual output would be reduced by much more than 10% but not by as much as by half.

Poland generates almost 80% of its electricity from coal and is the only member of the EU that has not pledged to become carbon neutral by 2050.

The ruling Law and Justice (PiS) party took power in 2015 partly on promises to sustain coal. Since then it has gradually closed a number of mines and has withdrawn from new coal projects.

Government officials have however said repeatedly that coal will long remain an important energy source for Poland, fearing that miners' protests may undermine electoral support.

The restructuring plan comes shortly after incumbent president Andrzej Duda, a PiS ally, won a presidential vote that was important for the party to continue its reforms. The next national parliamentary elections are not due until 2023.

"Today we do not hide from the employees and the trade unions that the situation is critical," PGG Chief Executive Tomasz Rogala was quoted as saying in the ministry's statement.

PGG is owned by other state-run companies, including listed power producers PGE, Energa and Enea , and gas firm PGNiG. (Reporting by Agnieszka Barteczko Editing by Susan Fenton and David Holmes)

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